Military Debt Issues are a Serious Matter

Part 2 of 3: While it may be tempting to forget about your loans while trying for a fresh start, don’t even think about hiding the fact of your defaulted or delinquent student loans from the military. The same goes for serious military debt issues. According the United States Code, Title 10, Subtitle A, Part II, Chapter 47, “misrepresenting” or “deliberately concealing” a known “material fact” can result in a Fraudulent Enlistment or Appointment (in the case of the service academies) charge.

The punishment for Fraudulent Enlistment or Appointment can be harsh: while it used to be specified as being “Dishonorable discharge, forfeiture of all pay and allowances, and confinement for 2 years,” according to the Army’s official site, it now “shall be as a court-martial shall direct”. That can work either way: the leeway that the statute gives a military tribunal can make the sentence more lenient or more severe. To help reduce the problem, the Air Force started in 2008 to perform 100% credit checks on all applicants to ensure that they do not process anyone with debt issues unknowingly.

The Defense Office of Hearings and Appeals maintains a website that lists many cases of people who defaulted on their student loans and were subsequently denied security clearances. In “Case No. 09-04198.h1”, decided July 30, 2010, it was held that security clearance be denied for a person who was paying off delinquent student loans, but on an involuntary basis: “Applicant has accumulated numerous delinquent debts, including a substantial child support arrearage and delinquent student loans. He is paying child support by automatic payroll deduction. His student loans are being collected by involuntary deductions from his pay. He has not resolved numerous medical bills, a school textbook debt, and several cell phone bills. Clearance is denied.” The administrators clearly made their point that in this case, it was not merely being delinquent but also that the applicant didn’t take personal responsibility for paying off debts: someone (the system) had to garnish the money.

Conversely, working hard to pay back student loans under adverse conditions has been rewarded. In Case No. 09-00660.h1 it was held, “Applicant is 30 years old and has worked for a federal contractor since 2008. He began experiencing financial problems when he was underemployed and unemployed. When two of his debts became delinquent, he contacted a debt consolidation company to set up a repayment plan. He has settled and paid one of the debts and is making consistent monthly payments to settle the other. He has no other delinquent debts and has consistently paid his student loan, even when he experienced a decrease in income. Applicant mitigated the security concerns under Guideline F, Financial Considerations. Clearance is granted.”